How to profit from the generation who love to spoil themselves

A FASHION crisis has hit the High Street to the tune of £700m, and retailers aren’t expecting younger shoppers to help reverse the trend.

Those in their 20s to mid-30s – known as millennials or Generation Y– are abandoning clothes and handbags in favour of experiences.

This demographic makes up around 20pc of the UK population. And unlike their baby-boomer parents who typically liked to buy houses and fill them with stuff, they are increasingly spending their cash on eating and going out.

‘Millennials tend to concentrate their spending on leisure rather than material possessions,’ says Craig Bonthron, co-manager of the Kames Global Sustainable Equity Fund.

‘They expect higher quality, healthier ingredients, and when they do finally settle down they have very high standards. It’s a trend driven, in part, by the fact that home ownership is out of reach for much of this generation. The question for investors is how to profit from it.’

Holiday operators such as Tui are an obvious beneficiary of this movement, according to Helal Miah, analyst at The Share Centre. ‘You might think that with terrorism fears and a weaker pound there would be issues for these companies, but people still want to travel, they just go to a different destination,’ he says.

Meanwhile, Hostelworld has reported an increase in bookings from mobile phones. Its cheaper rooms and online reservations system appeal to backpackers and those on a low budget.

Restaurants, pubs, bars and cafes are a major domestic beneficiary of the millennial-abouttown. Tom Becket, chief investment officer at Psigma, says: ‘Discretionary spending is the main thing leading the economy right now. Both in the UK and the US, younger people are spending more than ever in bars and restaurants.’

This could help food wholesaler Booker Group, which is supplying those restaurants and cafes seeing an uptick in trade, says Becket.

Meanwhile, Miah rates pub chain Marston’s. He says: ‘It has switched its focus away from just drinks into good-quality food, and that is what people are going to pubs for these days.’

Miah also likes The Restaurant Group, which is behind chains such as Frankie & Benny’s and Chiquito. It’s had a tough time in the past year, but with a new management team it could get a boost. He says the restaurants benefit from being located at leisure parks and shopping centres where footfall is high, particularly in the Christmas season and with blockbuster movies such as Rogue One: A Star Wars Story set to drive up customer numbers in coming weeks.

When they’re not eating out, millennials are indulging in high-quality home cooking, according to the experts. Kerry Group is a global food ingredients firm, which works for brands and for supermarkets.

Bonthron says: ‘Younger shoppers have shifted away from packaged foods with artificial processed ingredients towards fresh, organic and healthy alternatives. That means there is a grow- ing need for ingredients companies which can support large players to adapt their products and help emerging new brands grow.’

The Irish-listed firm recorded revenue of £2.7bn in the first half of the year.

Notoriously health-conscious millennials might also push up profits at The Gym Group, which has about 70 gyms open around-the-clock.

The business launched six new sites in the first half of the year and grew its membership number by almost 20pc to 424,000.